More Americans are using their 401(k) retirement plans to help cover financial hardships as consumers continue to confront persistently high inflation.
Wealth Enhancement Group senior vice president Nicole Webb provides insight on building a retirement fund on 'Making Money.'401 retirement plans
in order to cover a financial emergency as high inflation rages, according to new data from Vanguard Group. About 2.8% of workers participating in employer-sponsored 401 plans made a so-called "hardship" withdrawal in 2022, according to data from Vanguard, which tracks about 5 million accounts. That marks a major increase from the 2% rate recorded before the pandemic began and is also up from the 2.1% reading in 2021.
A person who takes a hardship withdrawal also cannot pay it back to their 401, and cannot roll that money into another retirement savings account. stubbornly high inflationThe government reported last month that the consumer price index, a broad measure of the price for goods including gasoline, groceries and rents, rose 6.5% in December compared with the previous year. Although the gauge fell 0.1% over the course of the month, it remains about three times higher than the pre-pandemic average.
The Bureau of Labor Statistics is expected to release August consumer price index figures on Sept. 13, 2022.When accounting for inflation, average hourly earnings for all employees actually declined by 1.7% in December from the same month a year ago.
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